Should US government debt be rated junk?

FORTUNE -- A few weeks ago, Hedgeye, the investment research firm where I'm a managing director, hosted a conference call for our subscribers that posed the question, "Should U.S. Government Debt Be Rated Junk Status?" Given that debt issued by the U.S. government continues to trade at almost all-time lows in yield, this is a contrarian call to say the least.

But while investors are willing to accept little in the way of return to own U.S. government debt and the U.S. has retained its AAA credit rating, the metrics by which we use to evaluate the balance sheet of the United States continue to deteriorate.

Typically, a bond receives junk status due to its increased risk of default, and therefore pays higher yields to the owners of the bonds to make up for the risk. In general, the owner of a bond is subject to many risks: interest rate risk, inflationary risks, currency risk, duration risk, and so forth. In this instance, as it relates to the United States, we are actually most concerned with the risk related to future repayment. Specifically, with projected deficits for at least the next fifty years, will the United States be able to repay its debt and, if so, on what terms? (more)